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Egypt Told to Contain Risk of Inflation

Egypt should maintain tight monetary policy to contain the risk of inflation as a result of fuel and electricity subsidy cuts, the International Monetary Fund said on Monday, in a statement that praised progress on reforms tied to a new $2 billion loan, Reuters reported. The IMF’s remark comes days after Egypt’s central bank decided to keep interest rates steady, citing inflationary risks, and after the IMF executive board announced Egypt had made sufficient progress on economic reforms to receive its next loan disbursal. Egypt kicked off its three-year $12 billion loan program in late 2016, agreeing to tough reforms such as deep cuts to energy subsidies, new taxes, and a floated currency in a bid to draw back investors who fled after its 2011 uprising. “Strong program implementation and generally positive performance has been instrumental in achieving macroeconomic stabilization,” IMF First Deputy Managing Director David Lipton said in a statement. He said the country’s near-term growth outlook was “favorable, supported by a recovery in tourism and rising natural gas production.” Egypt’s strong foreign reserves meanwhile meant it would likely be able to weather “tightening global financial conditions” that have seen a “shift to capital outflows” in emerging markets in recent months.